Is Lean Manufacturing a practical application of Austrian economic theory?
Having followed Austrian economics and especially the audio lectures for a couple of years I was wondering what the relationship with lean manufacturing and its underlying ideas would be. My interest stems from being a consultant/trainer for lean thinking and lean manufacturing myself. What actually triggered the question for the relationship is the importance of value in both Austrian economics and lean manufacturing as well some other issues that may somehow interface.
The main principles of lean manufacturing / lean thinking are:
Here are other possible relationship or fields common interest between Lean Thinking and Austrian Economics:
* Value Theories - Value as defined by customer
* Lean enterprise and spontaneous organisation around a value stream.
* The lean enterprise and the theory of the firm.
* Lean Approaches versus bureaucratic approaches
* Lean and business cycles.
I am more then willing to investigage this further and provide more information on the matter and would like to hear more comments on this. Of course I would like to write articles on this and publish them on my web site on lean manufacturing citing information I got here , too
I'm interested in others' responses to this as well. I work in manufacturing and we're trying to turn one of our plants around right now to a lean approach. And the biggest pushback is the people on the line and supervisors. They remind me of government bureacrats, contantly demanding that the current way is the right way and all we need is more staff, more pay, more etc., etc. Anything but to change the actual method and be demonstrably answerable to a customer's demands. For some they think they're job is in danger. Some may be right, but others look in the face of greater productivity and bigger per piece bonuses for them personally and still resist the changes.
I don't understand. How could any aspect of any production method be justified by anything else than by it producing more of what the buyers want at smaller cost? By this standard, allowing workers to have a siesta nap after lunch qualifies as lean if it results in their sufficiently increased productivity after they wake up. Isn't lean, in this case, just a fancy way of saying good?
xahrx:I'm interested in others' responses to this as well. I work in manufacturing and we're trying to turn one of our plants around right now to a lean approach. And the biggest pushback is the people on the line and supervisors. They remind me of government bureacrats, contantly demanding that the current way is the right way and all we need is more staff, more pay, more etc., etc.
Thanks for the reply. I may come to the implementation issues later, but would like to deal with the underlying theoretical issues first. Just on a general note, while the problem may show up at the lower rank and file, the root cause is usually higher up. In your case they may suspect that the companies issue is just head count reduction - so the first thing, you'd have to do is giving a guarantee that nobody will be fired due to the lean initiative the company takes. Where the physical flow is involved things are per usual more visible, it is however better start with the flows of information (in management) and streamline them. This being known from experience, I know would like to show deductively from theoretical axioms and assumptions. My first concerns are how value theory and human action / praxeology fit into this.
lean manufacturing is austrian economics. The reason lean fails to make any headway is that we do not have an actual free market as described by Mises. During the time the US was the closest to a free market, Henry Ford created the company that is the foundation of all lean ideology. Toyota pales in comparison to what Ford achieved.
Please feel free to read my book at www.leaneconomics.org
and my article "Yesterday, today and tomorrow" at Lean.org. just google Lean economics and it will come up. It has been published at the Business Standard and LEI (lean enterprise institute)
Please contact me if you want to try and work together on this. My goal is to start a lean economics conference in which lean leaders and free market leaders come together to promote these ideas. firstname.lastname@example.org
I dont buy into the dont fire anyone ideology. In fact when you want to change the culture the best and easiest thing to do is to get rid of the naysayers right away and let them know you are not going to back down. You have to send the strong message that there is a new sheriff in town. Sort of the Bill Parcels approach, and why he won many superbowls by getting rid of the superstars on the team that were destroying team chemistry. You want results, then you have to create a team that can work together, and so its just much easier to get rid of the miscontents. Fire a couple of people and see how quickly the rest start to understand you mean business.
The dont fire anyone ideology comes from lean consultants, that want to prolong their consultancy, so its better if it takes more time.
Then how to you justify, Porche?, Virgin Airlines, Polo, and many other companies that sell products at much higher costs then competition. Lean is not so easily defined by one business model.
You produce only what the customer wants, and if you keep getting customers then you are doing something right.
The worst thing you can do in business is try to copy some other business. It means you have alread lost the battle. Toyota laughs at all these lean copy cats.
lean is not only about productivity, but if the siesta works, why not?
Lean manufacturing is an entrepreneurial methodology. It's an art form, not an exact science. Austrian economics has almost nothing to contribute. The closest topics imo are structure of production theory, pricing of factors of production, economic calculation, the forms of income earned by entrepreneurs, and vertical integration. And there is little that these can contribute. Eliminating waste and becoming more efficient is more a matter of encouraging a culture of innovation, initiative, cooperation, diligence, and personal responsibility.
Stephen I disagree 100%, that Austrian economics has nothing to contribute, and so do the Lean Leaders. I was talking about this with Womack, Jones and Shook last year at a Lean Conference and they agreed that lean has not been defined completely, and up till now the focus has been on simplistic ideas due to that they basically sell well. At the moment Shook is reviewing my book, and with luck LEI will publish is as they did my article "Yesterday, Today and Tomorrow" Google it if you want an quick snapshot into the ideas.
Lean by definition (Customer Focus) is free market economics as you even state (entrepreneurial methodology). Economics is an art form and not an exact science,and the same with lean. Anyone that tries to tell you that Economics is an exact science is a snake oil salesmen, just like many lean consultants. Why do you think Bernake cant figure out how to fix it? Why are there no lean companies besides Toyota? Very little achievement by lean I must say considering we are supposed to be in a lean revolution.
Govt interferes with the pure definition of Lean. Govt and govt regulations are a disruption in the natural value stream between the customer and the producer. Complete Muda if you truely believe in Lean concepts. Mises says the same thing. Govt is waste. Plain and simple. The customer will regulate the producer with purchasing decisions. This is lean in a nutshell.
Gold standard promotes production over speculation. Inflation v deflation. The gold standard will promote deflation of prices due to more products chasing stable money supply and competition. This promotes productivity, and increased purchasing power. This creates wealth. Henry Ford raised wages and lowered product costs during the only time in History a country was the closest to a pure Free Market. This did not happen by accident. Toyota pales in comparison to what Ford achieved.
Without the free market lean goes nowhere, has absolutely no traction. There are no modern lean successes and even Toyota is floundering. Due to that we dont have a free market as defined by Mises, and so we dont have lean. Yes you have companies that have lean tools. So what? Thats easy.
I wrote a book about this www.leaneconomics.org. You are free to download and read it for free and try to expand your understanding of lean and make comments.
The housing market bubble bursting rippled thru the economy and almost every company suffered massive losses including Toyota. Start by asking Why 5 times.
Lean is much more. Read Henry Ford's book, "Today and Tomorrow". He understood as well.
Economics is a science. It's an axiomatic deductive science. What many economists do nowadays, is not economics. It's economic modelling (which is not an exact science but an art), forcasting, dreaming up jibberish, and PR for the central bank, IMF, and so on.
Science has exact solutions. Arts are open ended and have inexact, or a range of solutions. One can apply a science to an art. But for lean manufacturing, specialized technical knowledge and soft skills are what counts.
Critics have concluded that modern Austrian economics generally lacks scientific rigor, which forms the basis of the most prominent criticism of the school. Austrian theories are not formulated in formal mathematical form, instead using mainly verbal arguments based on what proponents claim are self-evident axioms. Mainstream economists believe that this makes Austrian theories too imprecisely defined to be clearly used to explain or predict real world events.
Who better predicted the 2008 crash? Austrians like Mark Thornton and Bob Murphy, or Neoclassicals like Krugman and Bernanke?
Should I care about critics who are simply wrong?
Also, I'm not sure how formalization would help advance the science much. I'm open to the possibility, I just haven't seen anything compelling.
Lean is business. Nothing more nothing less. Why did everyone want to copy Toyota? Because they were making tons of profits. This is the exact science and solution of any business venture. Do the ends justify the means? It is measureable? Profits are measurable. Technical knowledge and soft skills are just one part of achieving a successful organization. They do not guarantee success. Exchange rates have more of an affect on my business then soft skills and technical knowledge.
Lets make a quick comparison between the two greatest lean accomplishments in History Ford v Toyota
Ford - Free market as defined by Mises
Toyota - Keynesian World
Can you see the difference?
We dont have lean, we have lean marketing
Here is a perfect example of the entire misundersanding in the lean community. This example I copied from the LEI website incorrectly tries to state that costs are going down as well as product cycle times for automobile production. The exact opposite is true. This is due to Keyenesian economic theory if we were in a free market then results would have been true to this chart.
Lean has generally accomplished nothing except make some professors and consultants rich.